Blow for Hollande as France to miss budget target for 2013
Newly-elected French President François Hollande received a blow to his hopes of pulling the country out of the economic crisis after figures released by the European Commission show France, and Spain, will miss budget deficit targets for next year.
The French public deficit is expected to hit 4.2 per cent in 2013, higher than Hollande's three per cent target, while the economy will grow by 1.3 per cent next year, also below the Socialist leader's projection of 1.7 per cent.
European Union Economic Affairs Commissioner Olli Rehn said the 17-nation eurozone was currently in a "mild but short-lived recession" and would see a "slow and subdued recovery" at the start of the second half of the year.
"A recovery is in sight, but the economic situation remains fragile, with still large disparities across member states," Rehn said, warning that low growth would endure unless the EU took "further determined action."
Economic activity is estimated to have contracted in the first quarter of 2012 after shrinking at the end of last year, officially putting the eurozone in recession, the commission said.
The eurozone's economy is forecast to shrink by 0.3 per cent this year but grow by one percent in 2013. Unemployment will stay at a record high 11 per cent this year and the next.
Hollande defeated right-wing President Nicolas Sarkozy last Sunday, vowing to push for growth policies in an election marked by a voter backlash against the austerity creeping across Europe since the Greek debt crisis erupted in 2010.
Facing "difficult times ahead," Spain is forecast to be the only eurozone nation in recession in 2013, shrinking by 0.3 per cent after contracting by 1.8 per cent this year, the commission said.
Spain was originally supposed to bring the deficit down to 4.4 per cent this year, but Prime Minister Mariano Rajoy convinced EU partners to raise the target to 5.3 per cent after it hit a worse-than-expected 8.5 per cent last year.
Italy, by contrast, is "on track" to meet its deficit target, Rehn said, confirming a turnaround for a country that was facing market turmoil over its high debt late last year.